A new World Bank report concludes that at the end of 1998 China had 106 million people living in dire poverty, about 11.5 per cent of the population.
The problem stands out in ethnic minority areas despite a repeated pledge by mainland leaders to develop remote areas inhabited by ethnic minority groups.
The report argues that solving the problems of absolute poverty will help solve conflicts and the most fundamental problems of the minorities. Most of the poverty is now concentrated in remote upland areas, especially in China's western provinces, after poverty declined sharply in eastern and central provinces.
The report is based on the international standard of income of US$1 (HK$7.80) a day or less. The Chinese Government uses the lower standard of 66 US cents, a day, which gives a total of 42 million people.
Just over half the poor live outside the 592 officially designated poor counties. The report points out that since there are 21 million absolute poor in these 592 counties, with a total population of 200 million, government assistance is being severely diluted. It also states that credits for poverty reduction often do not reach the needy. Poor farm households have no collateral to offer the Agricultural Bank of China and can rarely access capital.
Many local governments in poor areas use poverty relief loans to start up rural industries in order to generate funds to pay their own staff. About half of all subsidised loans to reduce poverty went to support loss-making village and township enterprises and have led to a net decline in revenues for some counties.